This GOP tax plan provision could be ‘catastrophic’ for seniors

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This GOP tax plan provision could be ‘catastrophic’ for seniors
Seniors who have been itemizing tax deductions would be affected heavily by the Trump administration's tax plan, according to this article from the Washington Post. That's because they incur hefty medical bills, which they deduct on their returns to save on the costs. The GOP tax plan would make itemized deduction less valuable. For some seniors, this means they would be losing a deduction that covers payments for nursing homes, assisted living or inpatient hospital care, according to the article. Indeed, nearly 8.8 million households filed 2015 returns that claimed the medical and dental expenses deduction, according to the IRS. Moreover, 49% of those who took the deduction had income of less than $50,000, and 69% had income under $75,000, according to the AARP.

Even wealthy Americans are worried about this retirement expense
A recent survey found that health care expenses are a top financial concern for retirees, even those who are from higher income households, according to this article on personal finance website Motley Fool. To prepare for the hefty costs of health care, clients should consider putting money into a health savings account, which is funded with pre-tax dollars and provides tax-free withdrawals for qualified medical expenses. Another strategy is to buy a long-term care insurance policy using funds from an HSA, as the premium is a qualified expense.

Are your clients in the Roth conversion zone?
A Roth conversion can be a smart move for retirees below the age of 70, according to this article on Morningstar. An expert says that while retirees face a tax bill on the converted amount, they can withdraw the funds tax-free and will not be subject to required minimum distributions. A Roth conversion can also be a good strategy for tax diversification, as it helps enhance retirees' after-tax income.

7 smart money moves to make before year-end
Before the end of the year, retirees who reach the age of 70 1/2 should ensure that they take their required minimum distributions from their tax-deferred retirement accounts such as 401(k) plan and IRA, according to this article on Forbes. Not withdrawing the RMD by December 31 will trigger not only a tax bill but also a late penalty.

Take that, Miami: Pittsburgh is top retirement spot
Pittsburgh, Pa., tops new's list of 50 major urban centers that are friendly to retirees, according to this article on USA Today. Other major cities that are best places to retire are Boston and Los Angeles. “You really need to investigate what’s going to make you happy,” says an analyst with Bankrate. “What type of culture are they looking for? Are there people their own age?”

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Tax planning Tax deductions HSAs RMDs Roth IRAs Roth 401(k) Donald Trump IRS